The cancellation of a trust's registration under Section 12AB of the Income Tax Act necessitates adherence to principles of natural justice, requiring the disclosure of relied-upon adverse materials and the clear articulation of specific regulatory violations to ensure a meaningful opportunity for the assessee to respond.

O R D E R

Per Kavitha Rajagopal, JM:

This appeal is filed by the assessee, challenging the order of the Learned Commissioner of Income Tax (Exemptions) [‘Ld. CIT(E)’ for short], passed u/s. 12AB of the Income Tax Act, 1961 (‘the Act').

2. The assessee has raised the following grounds of appeal:

“1. The learned Commissioner of Income tax (Exemptions) ("Ld. CIT (E)") erred in invoking provision of section 12AB(4) of the Income Tax Act, 1961 ("the Act") without satisfaction of the jurisdictional pre-conditions necessary for invoking such power.

2. Ld. CIT (E) erred in cancelling the registration under section 12AB(4) of the Act on the grounds that the activities of the appellant are in violation of below mentioned provisions of the Act:

a. Section 2(15) of the Act i.e. activities were not charitable in nature;

b. Violation of section 13(1)(c) r.w.s. 13(3) of the Act i.e. direct benefit to specified person;

c. Violation of section 11(i) (c) of the Act i.e. application of funds outside India without Board Approval.

Ld. CIT (E) failed to appreciate that cancellation of registration could not be based on these grounds.

3. Ld. CIT (E) erred in holding that the activities were not charitable in nature.

4. Ld. CIT (E) erred in holding that there was a direct benefit to special persons and therefore section 13(i) (c) r.w.s. 13(3) of the Act applied.

5. Ld. CIT (E) erred in holding that the activities of the appellants were in violation of section 11(1)(c) of the Act.

6. Ld. CIT (E) failed to take into account in various detailed submissions made by the appellant.

7. Ld. CIT (E) erred in alleging in the impugned order, that in course of assessment proceedings, Faceless Assessing Officer had made a reference for cancellation of registration on the grounds that appellant had committed specified violation as mentioned in explanation below section 12AB(4) of the Act.

8. Ld. CIT (E) erred in taking a view contrary to the view of the Tribunal in appellant's own case for Assessment Year 2010-11 and 2012-13.

9. Ld. CIT (E) erred in holding that the activities of the appellant were not genuine, overlooking the entire conspectus of facts and background in which the appellant was formed and continues to exist till date.

10. The Appellant craves leave to add to or amend or alter the aforesaid grounds before the disposal of appeal as they may think fit by themselves or by their representatives.”

3. Brief facts of the case are that the assessee trust was incorporated as a non-profit company u/s 25 of the Companies Act, 1956 (now repealed and replaced by section 8 of the Companies Act, 2013) in December 2008 and the certificate of commencement of business was issued in April, 2009. The assessee claims that its activities are for general public utility without any profit motive and not related to any trade, business or commerce. The assessee company’s shares are majorly held by State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citi Bank and HSBC Bank. The assessee was granted regular registration u/s 12A(1)(ac)(i) of the Act dated 23.09.2021 by CPC in Form 10AC valid for five years commencing from A.Y. 2022-23 to 2026-27. The assessee had filed its return of income for A.Y. 2022-23 dated 04.11.2022 declaring total income at Rs.Nil after claiming refund of prepaid taxes amounting to Rs.3.43 crores which includes refund of advance tax amounting to Rs.2.51 crores. The assessee’s case was then selected for complete scrutiny during which the Faceless Assessing Officer (“FAO” for short) had made a reference for cancellation of registration on the gr